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Phillips PPP Bill Becomes Law, Urgent Aid Now More Useful for Small Businesses

Forgivable PPP loans are available for a limited time, small businesses should act now to access relief

On June 5, President Trump signed the Paycheck Protection Program Flexibility Act (H.R. 7010), authored by Reps. Dean Phillips (D-MN) and Chip Roy (R-TX), into law. The bipartisan legislation immediately makes Paycheck Protection Program (PPP) loans from the Small Business Administration (SBA) more accessible and useful for small businesses as millions around the country face economic uncertainty due to the coronavirus pandemic.

“When I heard from Minnesotans that hastily-designed, one-size-fits-all PPP rules weren’t working for their businesses, I knew Congress had to act quickly,” said Phillips. “Our corner stores and neighborhood restaurants are suffering – I listened to their stories, wrote thoughtful legislation, built a coalition, and am pleased that the Paycheck Protection Program Flexibility Act is now the law of the land. These are the changes our small business owners were asking for, and thanks to some meaningful teamwork, their futures are a little brighter.”

With only a single vote against it in the entire Congress, Phillips’s Paycheck Protection Program Flexibility Act was the result of effective bipartisan collaboration. The bill was supported by a broad coalition of 55 industry groups, endorsed by the Washington Post and Wall Street Journal, and based on feedback from small business owners in Minnesota and around the nation.

PPP LOANS ARE STILL AVAILABLE, but small businesses must act by June 30, 2020 to access relief. The law makes the following changes to ensure that more small businesses, like independent restaurants, can utilize PPP:

  • Extends the loan’s covered period to December 31st, 2020 – Under the original terms of the PPP, businesses would have been unable to spend loan funds after June 30th.  With many businesses shuttered due to stay-at-home orders, this would have been impossible. The PPPFA provides businesses more time to spend PPP loan proceeds through the end of the year.
  • Extends the period for calculating loan forgiveness – Under the PPP, this period only lasted 8 weeks, but has now been extended to 24 weeks after loan origination or December 31st, 2020 – whichever occurs first.
  • Lengthens the loan maturity to a minimum of five years for future borrowers – When the PPP was first enacted, the Small Business Administration arbitrarily limited loan maturity periods to just two years – far too short of a time for many businesses to repay loans. The PPPFA ensures that future borrowers have at least 5 years and up to 10 years to repay their loans.
  • Increases Amount of the Loan that can be spent on non-payroll expenses – The Small Business Administration had instituted requirements on PPP loans requiring that only 25% of funds could be spent on non-payroll expenses such as mortgages, rent costs, utilities and interest on debt obligations to maintain full loan forgiveness. This bar was too rigid for the diverse structure of American businesses. The PPPFA increases eligibility, allowing businesses to spend up to 40% of PPP funds on non-payroll expenses.
  • Extends the rehiring deadline – Borrowers will now have until December 31st, 2020 to rehire employees in order to receive loan forgiveness.  Under certain circumstances, such as when state or federal health orders require reduced business capacity, businesses may also qualify for safe harbors to maintain forgiveness even if they are unable to rehire all employees.
  • Provides up to 5 months’ additional payment deferral – The PPPFA alters deferral processes so that payments won’t become due until loan forgiveness decisions are remitted to lenders.  With the covered loan period now extended until Dec. 31st, this translates into up to 5 months of additional payment deferral.
  • Eliminates Restrictions on CARES Payroll Tax Deferments for PPP Recipients – PPP loan recipients will now be able to access payroll tax deferments provided for in CARES.

These changes will ensure that many more small businesses across the country can access PPP aid, continue to operate, serve our communities, and keep employees on the payroll.

  • Click here to read the Treasury Department’s interpretation of the Paycheck Protection Program Flexibility Act
  • Click here to learn more about PPP loans from the SBA
  • Click here for a list of available PPP lenders in your state